Is now a good time to buy a home? Excellent question. You’re probably not going to like the answer though: Maybe. For some home buyers, now is an excellent time to purchase a home, while for others, not so much. Some should take the plunge into homeownership now, while others should consider delaying the process until a more favorable time. Which applies to you? American confidence is at its most pessimistic in years, with only half agreeing that now is a good time to buy a home. But that also means half of Americans DO think it’s a good time. So are you a glass half empty or half full type of person? Before you answer, consider these factors that could influence your response.
The public health crisis that is COVID-19 is jamming the gears of the real estate industry. Mandatory sheltering in place and stay at home orders restricted home showings and open houses, interfered with vendors’ ability to complete steps in the home buying process, and plummeted at least one in five working adults into unemployment. Home sales began declining in March. Experts project existing home sales to be 28.1 percent less than last year’s second quarter and new single-family home sales to fall to 34.9 percent below last year’s sales.
As the country entered the COVID-19 crisis, the inventory of homes available for sale already fell far short of the number needed to meet buyer demand. Good news: Homes overall are somewhat more affordable than last year. Not so good news: Finding an available home to buy is much more difficult. The U.S. inventory of homes for sale has reached historical lows, 53 percent below its long-term average listing per household metric. The supply shortage results partly from generational and demographic trends, partly from restrictions on construction during the pandemic. You’d think with all the recent time spent stuck at home, more people would be ready to leave their place of quarantine, yet many sellers pulled their listing for the duration of the crisis.
Experts believe many home buyers originally intended to buy this spring but then the COVID-19 measures thwarted those plans. They expect a release of this pent-up demand when the economy begins to re-open.
Good news: Because demand is lower you have less potential competitors when shopping for a home. Not so good news: A diminished housing supply will limit your choices.
Sales prices of homes remain at near-record highs, with expectations that they will remain high. The prices in some markets likely will soften. If you worry prices will continue to increase with the release of pent-up demand, now might be a good time to buy a home.
You still might be able to find a good bargain on price. As mortgage forbearances expire and past debts come due, the number of foreclosures likely will increase. You often can purchase foreclosed homes at a significantly reduced rate.
Already low before the coronavirus, mortgage rates continue to decline to record lows. As of June 2020, the average 30-year fixed-mortgage rate is 3.45 percent, a decrease of 12 basis points from a week ago. In May, the average rate on a 30-year fixed mortgage was higher, at 3.54 percent. The mortgage rates for 15-year fixed mortgages, the 30-year fixed jumbo, and the 30-year fixed refinance rate all declined, as did the 5/1 adjustable-rate mortgage rate.
These historically low mortgage rates mean you can purchase a higher-valued home for the same monthly payment. So, good news: Mortgage rates are ultra low. And, of course, not so good news: Getting a mortgage has become harder as lenders demand buyers meet more stringent credit criteria. For example, earlier in 2020, you would have been able to qualify for a Union Savings Bank mortgage with a credit score of just 580; the same loan now requires at least a 660 credit score. In another example, the biggest lender in the United States, JPMorgan Chase, now requires a minimum credit score of 700 and a 20 percent down payment.
Bottom line: This is an especially good time to lock in a low rate for a mortgage if you have good to excellent credit.
In actuality, there is no monolithic housing market. Multiple markets across the country exist, with their own peculiarities and economic realities. Regional variations have always existed for various reasons, but you can observe an obvious difference between housing markets in areas hardest hit by the pandemic, such as Florida and Nevada. Other markets, like the Dallas metropolitan area, seem to offer a positive outlook for potential home buyers.
Though the economic and health outlooks remain uncertain and subject to shift, predictions of an economic recovery abound. Everyone seems to have an opinion about what to expect. Experts project a W-shaped recovery. Yes, W-shaped: the real estate industry’s sharp drop this spring will noticeably rebound in the summer, followed by another drop in the fall, and finally, begin to stabilize in a direction toward recovery by spring of 2021.
Before deciding to take the plunge and buy a home right now, take a close look at your personal financial situation. Take a really close look. Honestly assess whether your job and income are stable, whether stock market fluctuations could impact your finances, etc. Now is not the time for overly optimistic or ballpark figures. If your financial future holds uncertainty, which it very well might given the historically high rate of unemployment across the country, consider waiting or buying a home for less than you can afford now in case you lose income in the coming months.
Keep in mind that during the pandemic, the home buying process progresses more slowly. Closing on a new mortgage easily could take at least 60 days, since COVID-19 has forced all aspects of real estate and mortgage closings to take much longer than usual. If you are considering purchasing a home now, have some patience.
Only you can answer whether now is a good time to purchase a home for you. Once you decide to buy a home, though, we can help you through that purchase. LemonBrew matches you with local real estate agents who will work with you on finding the right home, and once you’re ready to buy, we can provide the mortgage services to secure that home.